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May 19, 2006

Road Kill on Main Street
by David Andrews

Massive Wealth Transfer: Dead Ahead

Why are so many Americans asleep? Why are they still saving their money in Federal Reserve Notes? Why do they still stash it all in a bank or credit union for interest rates that do not keep up with inflation? The likelihood of a financial accident is growing daily. The tremendous debt in this country - government, corporate, personal - is beyond comprehension. I cannot really imagine a billion or a trillion of anything, can you? There are derivatives positions out there that have not yet been settled, in an unregulated market. M3 is no longer published, and the Federal Reserve is now free to monetize all this debt. What do you think will happen to all your dollars and all those banks?

Or perhaps you have bought gold mining stocks or ETF shares and figure you are protecting the future for yourself and your loved ones. Think again. These instruments may be profitable in the short term, but less so as the value of the FRNs in which they are denominated fall inexorably lower. I am not arguing that you don't own an actual chunk of the equity of a mining company when you buy its stock, nor denying the leverage that this affords over spot prices. What I am asking is, what is your exit strategy? In which currency will you take your "profits"? They won't pay you in gold! Do you think that holding mining equities will protect you when the US dollar is no longer the world's reserve currency and resumes its southward plunge? When US fiat goes, all fiat will go.

Perhaps the most important question is, do you think that gold is simply in a cyclical bull market, headed for a "blow-off top" when you intend to take profits, and then everybody will go back into the Dow while carrying FRNs around in their wallets? Is gold just another "investment" for you, a way to increase your pile of FRNs? Brother, you need to throw out the gold stock newsletters you subscribe to and sit down to give this some long, hard thought! Keeping you in stocks, whether gold or Dow or Nasdaq, is just what the Fed and the government are depending on. They can manipulate this "paper" far more easily than they can the POG or POS.

When the Great Inflation comes along, would you rather be in "paper" or in "things"? You cannot keep up with inflation if you are in dollars. Get out of those dollars and into precious metals. If you want to own gold, buy actual gold. If you want to own silver, buy actual silver. Worldwide, gold is going east, leaving us here in the west to wallow in funny money. Soon, the east will not only have most of our jobs, but most of our wealth, too. Our government spending is out of control, and the speeding train is already partially derailed. It is too late to get it back on track. Our cost of living is rising faster than our incomes, and everybody seems to be OK with that. Right? Central banks have done a 180 and are now buying, not selling gold. The real thing. They want it all. But you are happy with stocks?

Some Things Are Sustainable; Some Are Not

The sticky fingers of Congress have already gotten into the Social Security Trust Fund, and there is nothing left but IOU's. Expect a new round of corporate bankruptcies with accompanying pension defaults. If they haven't got their mitts on every last dime of yours yet, they will, believe me. This isn't just happening to the other guy! Stocks will not provide you with a comfortable retirement. They are just more paper. I have no idea where so many people got the impression that what CEOs want is in the best interests of the shareholders. I sincerely doubt it.

What, you say - you have stocks and the Dow has been again knocking at the door of 11,700? Fergitaboutit. That was in year 2000 dollars. It would have to go much higher in 2006 dollars to even come close. The Dow is not levitating on its own powers. Fed "repo" money keeps it up there. For your benefit? NO. For the benefit of foreign owners of US debt. The more foreign debt money the Fed and the government can keep safely "parked" in toppy equities, the less of it they have to worry about going chasing after the likes of Unocal or our ports.

Here's a thought for you: the market may never go down! The flush of liquidity that has been unleashed by the Fed has propped up the nominal values of everything (except FRN's, of course). Lately, Richard Russell has stated that two generations of Americans have now grown up without ever knowing hard times. Even Russell thinks that is not sustainable. PE ratios of the market currently reveal no value out there, whatever level the indexes reach.

Another scary thought: the prices of gold and silver may never go down again - even after everybody thinks the bull market is over! Why? Because they always have the same value anyway. We have just been trained to think of their "price" as the number of dollars required to buy them. That is how our leaders want us to think of it. They would actually prefer that we didn't think about it at all.

As a nation, Americans need to start thinking long-term, not next week, next month, or even next year. Our standard of living will decline - gradually, if we are lucky - as the dollar loses its status as the world's reserve currency and we no longer have access to the savings of the rest of the world. This is going to be a very painful adjustment for all of us. I am not afraid to come right out and predict that life as we have known it for so long, our best years, will soon be behind us. We will have to rebuild from scratch. Those who will be first to pick up the pieces will not be our youth, but the older ones who remember what life was like in a simpler time. The young have been wired and electronicized for so long that they could not survive even a medium-term power outage. An unlimited quantity of cheap energy is another thing that will go the way of the Dodo bird.

Liberty Requires Courage

Coming soon to a Main Street near you:

CONFISCATION of precious metals
MARTIAL LAW after another "terrorist" attack
NATIONAL ID CARD due to the Real ID Act of 2005
GUN SEIZURE spurred by actions of the United Nations
REGIONAL and STATE SECESSION from the Union
CIVIL RIGHTS and BILL OF RIGHTS suspension
SECOND CIVIL WAR of the United States

OK, so now you think I am a hopeless wacko conspiracy theorist masquerading as a mild-mannered precious metals writer. GOOD! If that's what it takes to get your attention, all the better!

If any of you reading this can give me even one really, really good reason why any of the above scenarios are not possible, nor even likely within the next decade (I think sooner), I will publicly retract that prediction. That is how certain that I am about it all coming to pass (I think worse).

Entropy Hits The Energizer Bunny

If we have not yet reached peak oil, we will before the decade is out. OK, the uphill road took us over 100 years, so the road back down will last another 100 years, right? Wrong. The best-quality sweet crude, the easiest-to-reach stuff, has already been pumped. What remains will be increasingly the heavier sulfuric variety of oil. Experts in the field can see no way that the tar sands or oil shale deposits can be economically harvested; that is, it would take a gallon of oil to extract a gallon of oil. And of course, our government has not raised a finger to subsidize research into alternative energy. They are still too busy making money from oil.

The great 2003 east coast "blackout" and the rolling variety in California were just previews of an exciting, brave new world. The cost of a barrel of oil will rise faster than the average American can afford to pay for it. For a while, oil and gas will go to those who can afford them, while the rest of us make do with what little we can find. We face an uncertain future regarding heating oil, natural gas, gasoline, diesel fuel, taken-for-granted electricity, and cheap food prices at the supermarket. Cheap? You bet - we haven't even begun to see what long-distance transportation of our food will really cost. Strawberries from California, oranges from Florida, lettuce from wherever that's 2,500 miles from us, spuds from Idaho. We will go back to doing what our parents and grandparents had to do - buy locally, in season. Expect premium prices.

Welcome To The United Socialist States of America

Once our wealth has been taken from us - almost a fait accompli at this point - our jobs exported, our incomes decimated, our homes heavily mortgaged if not foreclosed on, our youth indoctrinated from 12 years of leftist public schooling, and our money debased by the Federal Reserve, what it left for us? Even more frightening, our collective manliness has been stolen from us. It used to be called "the great American Spirit" and it brought us through more adversity than any young nation should have had to endure. While illegal immigrants take to the streets to protest by the hundreds of thousands, we grab the remote to watch the spectacle, safe (we think) in our recliners. Soon it will be our turn to protest in the streets, but the government thinks (and they may be right) that we will be led meekly, like lambs to the slaughter. We will be in such distress, that we will be happy to fall into a large Socialist safety net.

This does not have to happen! Go to your windows, wake your neighbors, howl like a banshee This is what the Federal Reserve and un-backed paper fiat money have brought us to. What is coming to Main Street will require more than owning fully paid-for physical gold and silver, although that will be an excellent start. We need to use our collective minds, instead of sitting on them. The US government, the Federal Reserve, Congress, and all of our elected officials have already proven what inept, fumbling morons they all are. We can do much better! Why are we tolerating this nonsense?

You know what you have to do if you don't want to become roadkill. Now quit procrastinating, and just DO it!

David Andrews
Glastonbury, CT USA